Investment Opportunities in Jurong Lake District

The Jurong Lake District (JLD) got a fresh impetus from the Government this week as a choice investment location. The Urban Redevelopment Authority (URA) called a tender to develop a Master Plan for JLD. The developer and marketing agents for Lake Grande (slated to launch in July) surely will be cheering this news.

But the question to be answered (agents for Lake Grande will not be telling you) is "Are there other investment options better than Lake Grande".

For comparison purposes, we shall look at developments near to Lakeside and Chinese Garden MRT stations which are not more than 10 years old.

Let's take a look at where Lake Grande is located. Just beside Lake Grande is The Lakeshore, a 848-unit development completed in 2007. Further West lies The Lakefront Residences, a 629-unit development completed in 2014; Caspian, a 712-unit development completed in 2013; and Lakeholmz, a 369-unit development completed in 2005. There is no development which fits the 10 years criteria around Chinese Garden MRT.

Below is the unit size and estimated price for Lake Grande. On a per sq ft basis, it is between $1,300 and $1,400 psf.

Type	Size (sq ft)	Price (from)
1 bedroom	409 to 517	$580k
2 bedroom	614 to 861	$810k
3 bedroom	904 to 980	$1.18m
4 bedroom	1,152 to 1,173	$1.5m
5 bedroom	1,302	$1.69m

Source: Marketing agents

Is this price reasonable? What are the recent transacted prices in the area? The table below is organised in order of the "newness" of the development - uncompleted first, followed by most recent completion and so on.

Transacted Prices of Residential Units near Lake Grande (January to July 2016)

	Lakeville	The Lakefront Residences	Caspian	The Lakeshore	Lakeholmz
Price (psf)	$1,133 to $1,397	$1,265 to $1,363	$949 to $1,119	$961 to $1,068	$715 to $1,103
Unit Size	936 to 1,324	710 to 1,012	872 to 1,593	861 to 1,270	1,249 to 1,706

Note that there are fewer than 10 transactions for all developments except for Lakeville
Source: URA

It appears that Lake Grande is priced higher than its next door development, Lakeville, both which are from the same developer. A "premium" for newness?

The Lakeshore which is beside Lake Grande, is almost ten years old but priced by around 25% cheaper than Lake Grande. Certain units in blk 29 and 31 have an unblocked view of Jurong Lake. Also current asking prices are very close to transacted prices which means these are serious sellers.

The Lakefront Residences is priced very close to Lake Grande. I will not recommend unless the unit comes with a committed tenancy. Current asking rent for The Lakefront Residences is around $3,000 to $3,500 per month for a 2 bedroom unit.

If you do not mind buying a resale condominium unit, I dare say there are good buys out there. Just keep an open mind, do some research and not rely fully on what the agent says.

When will the Cooling Measures be Removed?

Recently there have been many calls to remove or tweak the cooling measures. But the Government has also repeatedly said it will stay for now and they have a rough idea when to remove it.

The question on everyone's mind is when.

Let me try to second guess that.

According to official numbers from the Urban Redevelopment Authority, property prices have risen some 62% from the trough in 2Q 2009 to the peak in 3Q 2013. In pure numbers, it means if property price on a per sq ft basis is $1,000 in 2009, it would have risen to $1,620 psf in 2013.

 
Source: URA

How much has property prices fallen based on the official price index? Around 9.1% as per the flash estimate for 1Q 2016. It means prices now are around $1,472 psf. Compared to the trough in 2Q 2009, prices are still 47% higher.

This also means property prices have appreciated on average 8% per year from 2009 to 2015. Have our economy grew on average 8% per year over the same period? The answer is no. So property prices have ran ahead of the economy.

So that is probably why the Government is not doing anything.

My guess is a comfortable range in the mind of the Government will be between 15 and 20% fall from the peak. If prices did indeed fall by this amount, the average price appreciation per annum is between 4 and 5%. This price appreciation is closer than economic growth.

	15% from Peak	20% from Peak
Estimated Property Prices at end 2016	$1,377 psf	$1,296 psf
Average Price Appreciation per annum	5.4%	4.2%

Source: Real Property Advisory Singapore

When will that happen? Again my guess is by the end of 2016 because 2016 will see the largest number of unit completed.